4. The nature of the contract proves that the creditor is interested in the labor of the debtor, because, at a given time, he (the creditor) is to receive the capital loaned, with increase. This, of course, the debtor could not afford, nor the creditor expect, unless the debtor were to bestow his labor upon the capital. And if he bestow his labor upon the capital, he must, of necessity, have his subsistence meanwhile. And as his contract is a lien upon everything in his hands, it must of necessity have been understood that he should appropriate his subsistence out of the property that is subject to the lien.
In short, the contract proceeds throughout upon the supposition that the subsistence of the laborer, while laboring on capital, must be provided for out of the capital on which he labors. And this supposition is not merely a reasonable, but it is a necessary one—for it is obvious that his subsistence must be thus provided for, whether he hold the relation of debtor to the capitalist, or that of a laborer for wages. In either case, his subsistence, while laboring, must be a tax upon the capital on which he labors.
In all this there is nothing that authorizes waste or prodigality on the part of the debtor; or that authorizes anything except what is consistent with such economy and frugality as good faith towards the creditor requires. But this point has been sufficiently explained in the preceding chapter.
Halting at this point, and looking back upon the ground we have gone over, does not that ground present a more rational view of the nature of debt, than any that has ever been practised upon by courts of law? Is it not the only view that can make the contract of debt consistent, either with morality, or with the ideu that creditors acquire any tangible, legal rights, to actual things, by virtue of that contract?
This view of the contract of debt places the debtor and creditor, to a certain extent, in the relation of partners. The creditor furnishes capital, the debtor labor. The separate values of this capital and labor become indistinguishably mixed—that is, the labor bestowed upon the capital adds to its value, by converting it into new forms—as, for instance, by converting leather into shoes. The debtor, while thus bestowing his labor upon the capital, receives his subsistence out of the mass; in other words, his subsistence, while laboring, is the first charge (as in all cases it necessarily must be) upon the combined capital and labor. The creditor holds the next lien upon this combined capital and labor, for the amount of his investment, and his stipulated profits. The debtor is entitled to the residue, if any there be, as the reward of his labor. During the partnership, the creditor holds the debtor to the observance of economy and good faith. Under these circumstances, both parties take the natural risks of the business. The creditor risks his capital, the debtor his labor.23
All this is obviously a joint operation, a bona fide partnership. The creditor, as well as the debtor, is to derive a profit from it. The prospect of profit is the creditor’s only motive for entering into the contract. The debtor, therefore, becomes a bailee, not merely for the benefit of himself, but also for the benefit of the creditor. What is there in morality, or in the legal rights of the parties to the capital and labor thus combined, that requires the debtor to take the risk, both of his own labor, and of the creditor’s capital, beyond the due exercise of his skill, industry, care, and good faith in the preservation and management of the latter?
The creditor adopts this mode of employing his capital, as being the most advantageous to himself. He has more capital than his own labor can advantageously employ. He must, therefore, in order to make his capital productive, either loan it to others, or employ the labor of others upon it, by hiring them, and paying them wages. He considers that, by loaning it, and offering the debtor an inducement to the exercise of his best skill, by a contract that gives to the debtor all the proceeds of the joint labor and capital, except a stipulated amount, (called interest,) he will better stimulate the laborer’s industry, skill, and care, and thus reap a better profit to himself, than he will if he hire the man as a laborer for wages. And this is the reason why he loans his capital, instead of hiring the labor necessary to employ it. But there is nothing in all this, that morally or legally entitles his capital—while it is in the hands to which he has thus, with a view to his own profit, chosen temporarily to entrust it—to an insurance against the necessary risks to which capital is always liable. Nor is there anything in all this, that morally or legally entitles him to make this bailee, and partner, his slave for life, in case of any misfortune to the partnership business, by which both his capital and the debtor’s labor should be lost. Nor is there in all this, anything that gives him any tangible, legal, proprietary rights, to property that his partner and bailee may earn after the partnership, or bailment, shall have terminated.
Endnotes
1. One of the greatest—probably the greatest—of all the evils resulting from the existing system of privileged corporations for banking purposes, is that these incorporations amass or bring together, and place under the control of a single directory, the loanable capital that was previously scattered over the country, in small amounts, in the hands of a large number of separate owners. If this capital had been suffered to remain thus scattered, it would have been loaned by the separate owners, in small sums, to a large number of persons; each of whom would thus have been supplied with capital sufficient to employ his own hands upon, with the means of controlling his own labor, and thereby of securing to himself all the fruits of his labor, except what he should pay as interest. But when all this scattered capital is collected into one heap, and placed under the control of a single directory, it is usually loaned in large sums, to a few individuals—generally to the directors themselves and a few other favorites. It probably is not loaned to one tenth, one twentieth, or one fiftieth as many different persons, as it would have been if it had been suffered to remain in its original state, and had been loaned by its separate owners. Individuals, instead of borrowing one, two, three, or five hundred dollars to employ their own hands upon, as would be the case but for these incorporations of capital, now borrow fives, tens, and hundreds of thousands of dollars, upon which to employ the labor of others. This process of concentration, monopoly, and incorporation, by means of which one man, a director, or a favorite of a bank, is enabled to borrow capital enough to employ the labor of ten, twenty, or an hundred men, of course deprives ten, twenty, or an hundred other men of the ability to borrow even capital enough to employ their own hands upon. Of consequence it compels them to sell their labor to him who has monopolized the capital. And they must sell their labor to him at a price that will give him a profit—generally a large profit. That is, they must sell it for much less than the amount of wealth it produces. In this way ten, twenty, or an hundred men are literally robbed of an important portion of the fruits of their labor, solely that a single monopolist may be gorged with wealth. It is thus that the legislation, which creates these large incorporations of privileged bankers, operates to plunder the many of the fruits of their labor, and pamper the few with the spoils.
2. Mutual benefit is the only foundation for the morality of contracts; or, at least, to be moral, a contract should contemplate no injury to either party.
3. If the capitalist were to hire his labor, instead of the laborer hiring the capital, the subsistence of the laborer would still be as much a charge upon the capital, as it is when the laborer hires the capital, and makes his own living the first charge upon the joint proceeds of the capital and labor.
4. There is, of course, some sympathy between all men, for a common nature compels it; but it is not quick or strong between opposite classes, or strangers, as it is between similar classes and acquaintances.
5. The judiciary probably would assert this principle, in this country, (and under a system of universal suffrage they would be sustained in doing it,) were it